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Ujjivan Financial Services posted a net profit of Rs 443 million in the second quarter ended September 30, 2018, as compared to a net loss of Rs 120 million in the corresponding quarter of the previous financial year.

Over the past year, the company's loan book has grown by 25 per cent to Rs 83.17 billion during the September quarter in the financial year (FY19).

Samit Ghosh, managing director and Chief Executive Officer at Ujjivan Small Finance Bank said, “We expect the growth to pick-up in H2 leading to 30-35 per cent Assets under Management (AUM) growth in FY19. The quarter also witnessed stressed liquidity in the money market. However, Ujjivan was not impacted because of our conservative asset & liability structure of relatively short term assets & longer term liabilities inherited as a microfinance institution

Loan disbursements are up by 22 per cent to Rs 23.83 billion at the end of Q2 FY19 and in terms of composition micro-finance and individual (MFI), loans constitute around 88 per cent of the company’s portfolio.

The non-MFI contributes 12.1 per cent to the portfolio as of Q2 FY19, compared to 4.3 per cent in Q2 FY18. This includes affordable housing loans worth 6.4 per cent of the portfolio, followed by medium-small enterprise loans worth 4.2 per cent and personal loans, and other new products, contribute 1.4 per cent to the company’s portfolio.

The cost to income ratio has increased by 77.4 per cent in Q2 FY19 as compared to 68.8 per cent in Q2 FY18. Cost of funds has reduced from 8.6 per cent in Q1 FY19 to 8.5 per cent in Q2 FY19.

Ittira Davis, Managing Director and Chief Executive Officer at Ujjivan Financial Services, told Business Standard, “We are able to pass on some of the costs and improve our margins. The main reason for our costs going up is because of the branch conversion, which requires hiring staff for the conversion. We expect income to go up in the coming quarters as the branches bring in new business.”

“Our cost of funds has reduced, even though the interest rate is trending upwards as we replaced high-cost legacy loans with customer deposits,” he said.

In a year, Net Interest Income is up by 45.4 per cent to Rs 2.4 billion at the end of Q2 FY19, while the Net Interest Margin (NIM) stands at 12 per cent which is an increase from 10.6 per cent at the end of the corresponding quarter of the previous financial year.

Retail deposits have shot up substantially contributing 31.3 per cent to the company’s total deposits in the second quarter of FY19, as compared to 9.5 per cent in Q2 FY18. CASA ratio improved to 9 per cent from 4.6 per cent.

The deposit base has grown to Rs 41.9 billion at the end of September quarter.

“The traction on the new business has picked up this year. “ast year we had the effects of demonetisation so we went a bit slow on the conversion of our micro-banking branches to full banking branches. This year we doubled the speed of branch conversions to complete it by the end of the financial year,” said Davis.

Ujjivan plans to expand its branch network to 475 by the end of FY19. In the first six months of this financial year, the company added 180 full-service banking outlets bringing the total to 367 at the end of September. There were 187 banking branches operational at the end of FY18.

Regulatory rules mandate that Ujjivan Financial service list its banking subsidiary Ujjivan Small Finance Bank within three years of operations, that is by January 2020.

“We are fully committed to abiding by the RBI guidelines in terms of promoter holding dilution to 40 per cent by January 2022 and listing of the Bank by January 2020 and are working out various options which are tax efficient and protects the interest of our shareholder. We have formed a Board Committee to evaluate all options and decide on a course of action by January,” said Ghosh.

Gross Non-Performing Assets (NPA) stand at 1.9 per cent for Q2 FY19, compared to 5 per cent in the corresponding period of the last year, while Net NPA has come down to 0.3 per cent against 1.4 per in the corresponding quarter of the previous year.